Microsoft will deliver the first preview version of Windows XP by early July, but early adopters could find that their PCs lack enough memory and processor speed to run the new operating system.

Meeting the deadline for the nearly final version of the consumer and business operating system is crucial to ensuring Windows XP is ready for the scheduled Oct. 25 launch. In preparation, Microsoft this week started notifying those who had signed up for a paid preview that they could place their orders.

But final testers, and those plunking down $20 for the preview, could be surprised at what they find in Windows XP Release Candidate 1. Memory requirements may be stiffer than expected; USB (universal serial bus) support will be limited to the older 1.1 version of the connection technology; and "ripping" of MP3s with Windows Media Player 8 could require a third-party encoder.

On the positive side, final testers also will find a sophisticated text, voice and video-messaging client capable of delivering near telephone-quality calls over the Internet; implementation of new product activation technology; broader support for hardware devices; and tighter ties to the Web.

The new features also will demand more PC horsepower than previously anticipated. Windows XP beta testers may have found Microsoft underestimated its recommended minimum configuration--a 300MHz Pentium II processor and 128MB of RAM (random access memory). The final version of Windows XP is expected to carry more stringent requirements.

Officially, Microsoft says any PC purchased from late 1999 onward should comfortably run Windows XP. But Gartner analyst Michael Silver sees this as way too conservative.

"You want to avoid installing Windows XP on a system more than a year old," he said, adding that a 650MHz to 800MHz Pentium III PC is a more reasonable minimum. Silver warned that Microsoft's holiday 1999 recommendation is a "little aggressive in terms of getting vendor hardware support."

One of Windows XP's more compelling features largely may account for the higher processing and memory demands. The new version introduces multiple consumer log-ins and fast switching between individual users. While convenient, the feature takes its toll, particularly on memory.

Gartner recommends a minimum 128MB of RAM and another 64MB for each additional consumer who is logged onto the PC.

That means households sharing a single PC might want to start with a minimum 256MB of memory.

"Memory may be cheap, but for an OS to have to use that much RAM to work well, that's just terrible," said John Terris, a programmer from St. Louis.

But Sean Spurrier, a systems developer from Charlottesville, Va., dismissed the extra memory requirements as insignificant.

"As it stands now, you can get 256MB of memory for under $60, so this is a very cheap upgrade for most," he said. "We can't expect to run top-of-the-line software on 5-year-old machines."

While the anticipated hardware requirements are likely to scare off some consumers, PC makers are counting on Windows XP to help pull the industry out of a prolonged slump. "We are hoping for and preparing for a jump in the (PC sales) category with the launch of XP," Hewlett-Packard CEO Carly Fiorina told financial analysts last week.

The preview version of Windows XP is expected to clarify differences between the consumer and commercial versions of the operating system, which could be an important prelude to Microsoft announcing Windows XP pricing. Until now, the differences between Windows XP Home and Professional have been too subtle, analysts have warned, setting up a scenario where some businesses would opt for the consumer version. Windows XP Home is expected to sell for substantially less than the Professional version.

Retail upgrades to Windows Me, Microsoft's current consumer operating system, average $89, whereas the more business-oriented Windows 2000 upgrade typically sells for around $190. But by moving to one operating system with different versions for the two markets, Microsoft faces a "pricing, distribution challenge," said Guernsey Research analyst Chris LeTocq. "If Microsoft is going to make a distinction, it has got to make it well."

Shawn Sanford, Microsoft's Windows group product manager, acknowledged that on the surface there are few differences between Home and Professional. "For a lot of people, it won't be very easy to tell the difference, because we expect that most of the basic features will be the same," he said.

Most of the differences will revolve around networking, security, and managing consumers and policies. Microsoft hopes to draw more attention to the differences as Windows XP's release approaches, Sanford said.

For Microsoft, making the distinction is important, both from a revenue perspective and getting consumers on the right version, analysts say.

"Businesses might be tempted to purchase consumer (Windows XP), but it's more than just Windows. They have to make sure the whole package makes sense to them," Silver said. "From an enterprise point of view, it's not only the version of Windows, but the system it is running on. You want a manageable system."

Certain features failed to make the cut in Windows XP, and the fates of others are still uncertain. As expected, Windows XP initially will not offer support for USB 2.0, even though the first add-in cards and peripherals supporting the technology are already available.

The new version of the USB standard for connecting devices such as portable storage and keyboards boosts throughput to 480mbps (megabits per second), up from 12mbps for version 1.1.

"USB 2.0, that is something we are committed to, but it will be post-launch when we ship the drivers," Sanford said.

MP3's fate remains uncertain. Windows XP Beta 2 "for test reasons" delivered a low-level MP3 encoder for converting CD songs to the digital music format, Sanford said. But the encoder has since been removed from Windows Media Player 8, which is integrated into Windows XP. "It's still too early to determine what we're going to do with the encoder," he said. "It's still too early in the beta process."

Spurrier sees only one reason for not including an MP3 decoder with Windows XP: Microsoft's trying to move people to its proprietary Windows Media Audio (WMA) format.

"Microsoft needs to understand, though, that WMA will never take off as a de facto standard because it is not universal like MP3 has become," he said.

Two of the biggest changes in the next publicly available version of Windows XP revolve around messaging and product activation.

In a tightly distributed beta version released last week, Microsoft introduced Windows Messenger, a communications console combining instant messaging, videoconferencing, online collaboration and application sharing, among other features. Analysts predict the feature could become the main driver for Windows XP upgrades.

The real test of Messenger's mettle may be how it handles Internet telephony. During a demonstration, the product "delivered near phone-quality" Internet calls, said Peter O'Kelly, an analyst with Patricia Seybold Group. While the telephony feature "looked great" in a controlled setting, real use over standard dial-up connections will determine whether Microsoft has created a "phone replacement," he said.

Consumers also will face off against Microsoft's new product activation technology, which is expected to be more stringent about registration requirements than Windows XP Beta 2. The activation technology forces consumers to register Windows XP either by phone or over the Web and locks the software to the PC's hardware configuration.

Arnold Hausmann, a systems analyst from Troy, Mich., said the activation feature is enough of a reason for him to "not upgrade to XP at all. I will not upgrade to an OS that requires me to register for operation. I would do that on a mainframe, but not on a PC."

Another important change will be the inclusion of Smart Tags with Internet Explorer 6, which is included with Windows XP. First introduced with Office XP, Smart Tags make disparate bits of data available within Office programs or from Web pages. A Smart Tag pull-down menu attached to a stock ticker, say, in Excel 2002 or Internet Explorer 6, might lead to the MSN MoneyCentral Web site for the latest share price.

Sanford said that Microsoft would not restrict Smart Tags just to Windows XP, but would introduce them to other Windows versions of Internet Explorer 6.

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